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Inequality 1 246Insights into poverty and inequality - 3 

The State of California publishes the name, department and salary of all employees of the state in an online database. Before its availability was widely known, four economists conducted an experiment with staff employed by state universities.

They wanted to test two theories about inequity.

The first theory was called the 'rational updating' model. People assess their salary prospects rationally when knowing what others are being paid. If they find that they are being paid less than their colleagues for similar jobs, they will judge that they could get a good salary rise. If they earn more, they will lower any expectations.

The second theory was called the 'relative income' model. This is more of a emotional reaction. If they find that they’re being paid less than their colleagues, they will see this as they are underappreciated leading to job dissatisfaction. If being paid more, they will have increased job satisfaction.

Selected university employees (thousands) were sent an e-mail informing them of the salary database which led to increased usage of the site. A few days later, they were invited to complete a survey about job and pay satisfaction along with fairness of pay setting and desire to seek another job. This survey was also sent to a workers who had not received the original email therefore they had no or little knowledge of colleague pay.

The findings were not as expected.

Those who had access to the salaries database and who had learned they were earning less than their colleagues were less satisfied and were more interested in finding new jobs. This was especially so among lower paid workers. So the 'relative income' theory won out on this point.

However, those that found they were being paid more than their colleagues showed no increase in job or pay satisfaction. They accepted the situation as is. 

This supports studies by Herzberg and Myers several decades ago that pay is not a strong satisfier but an employees’ perceived lack of pay or unfairly administered pay is a serious dissatisfier.  

Negative reaction to perceived inequity is wired into us when it seems we are on the receiving end. This is illustrated by the reaction of the workers that were hired first in the parable of the vineyard workers in Matthew 20.

What we don't see though are any protests by those that receive more than others.    

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Geoff Knott, 20/02/2018

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